Nikkei 225 Caps Seven-Month Rally on Abe Nomination

By Yoshiaki Nohara -
Feb 28, 2013

Japanese shares rose, with the
Nikkei 225 (NKY) Stock Average capping the longest monthly winning
streak since 2006, after Prime Minister Shinzo Abe nominated
Asian Development Bank President Haruhiko Kuroda to lead the
Bank of Japan. (8301)

The Nikkei 225 gained 2.7 percent to close at 11,559.36 in
Tokyo, with volume 17 percent below the 30-day average. The
equity gauge rose 3.8 percent this month, capping a seven-month
advance. The broader Topix rose 2.3 percent to 975.66.

“We are done with who will be the next BOJ governor and
from here the focus will be on what Kuroda will actually do,”
said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB
Investments Ltd., which manages the equivalent of about 6
trillion yen ($65 billion). “Currency and stock markets are
holding out hopes for bold monetary easing.”

The Topix surged 35 percent from Nov. 14 on optimism Abe
and the central bank will tackle deflation. The measure is
trading at 1.1 times book value, compared with 2.1 for the
Standard & Poor’s 500 Index and 1.5 for the Stoxx Europe 600
Index.

Abenomics

New leadership may tilt Japan’s central bank toward a more
expansionary monetary policy as Abe calls for a 2 percent
inflation target to be reached as soon as possible. Kuroda, 68,
advocated the inflation target more than a decade ago, and said
additional easing can be justified for 2013.

Kikuo Iwata, a professor at Tokyo’s Gakushuin University
who advocates greater oversight of the central bank, and BOJ
Executive Director Hiroshi Nakaso were nominated for the two
deputy governor positions, the parliament said in a statement
today. Sitting Governor Masaaki Shirakawa and his deputies will
step down on March 19.

U.S. Economic Data

Futures on the S&P 500 Index added 0.1 percent today. The
U.S. equity gauge gained 1.3 percent yesterday and the Dow Jones
Industrial Average reached its highest since October 2007 amid
signs the world’s biggest economy is improving.

Orders for durable goods excluding transportation gear
climbed in January by the most in a year, a sign companies are
expanding, while pending home sales increased more than
forecast.

“A recovery in U.S. capital investment is positive for the
market because that’s a driving force for growth,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co., which
oversees the equivalent of about 1.79 trillion yen.

Companies that do business in the U.S. advanced, with
Toyota adding 3.5 percent to 4,765 yen. Canon Inc. (7751), a camera
maker that gets 27 percent of its revenue in the Americas, rose
4 percent to 3,365 yen.

Japan’s industrial production climbed 1 percent in January
from December, the Trade Ministry said today. The median
estimate of 27 economists was for a 1.5 percent gain. Foreign
investors bought 190.4 billion yen in Japanese stocks last week,
according to the Finance Ministry.

Tokyo-listed shares of Japan Exchange Group, which doubled
in value since it moved to the country’s biggest equity venue in
January, plunged 11 percent to 7,060 yen after surging in the
final seconds of trading yesterday.

The shares were included in the Topix as of today and added
to the MSCI All-Country World Index tomorrow. The so-called
“index events” generated 30 billion yen in demand for the
stock, which typically sees 5 billion yen in daily turnover,
according to SMBC quantitative strategist Keiichi Ito.

GS Yuasa Corp., the battery maker for Boeing Co.’s grounded
787s, jumped 7.5 percent to 402 yen after Boeing said it will
keep using its lithium-ion battery.